Higher rents and less competition tempt landlords back to buy-to-let
The proportion of homes bought by a landlord so far this year is at its highest share since 2016.
An estimated 12.2% of homes bought in Britain have been snapped up by an investor, according to the Hamptons letting index.
This is up from a share of 11.7% last year but below 2015’s peak of 15.5%, the year before the 3% stamp duty surcharge was brought in.
However, a lower number of overall sales has meant that despite making up a larger share of purchases, this is still down by 30,000 when compared to last year.
Less market competition
Landlord confidence has improved over the course of the year too, with 37% of offers on homes coming from this buyer group in November, compared to just 14% in January.
Hamptons said less competition from other buyers also meant that landlords were paying above the asking price on just a quarter of investor purchases, compared to 30% among first-time buyers.
It said its data suggested landlords were going for homes which had been left on the market.
According to its figures, in November, the average home bought by an investor had been on the market for 54 days, up from 33 days last year. By comparison, homes purchased by first-time buyers had been on the market for 40 days on average, while homes bought by movers had been available for 50 days.
Landlords were also going for homes with higher yields, as 56% of purchases were in areas with average yields of 6% or more. By contrast, 85% of homes sold by investors this year generated yields below 6%.
Rising rents drawing landlords in
Yearly rental growth rose for the third month in a row, up 7.9% across Britain on average. Scotland saw the strongest rent inflation, where rents on newly let homes increased by 12.3%. In Outer London, the average rent increased by 8.9% and passed £2,000 a month for the first time.
This is compared to Inner London, where rent growth eased to 20.4% to £2,805.
Aneisha Beveridge, head of research at Hamptons, said: “Rising rents are tempting landlords to dip a toe back into the slowing sales market to try and pick up deals they couldn’t have got six months ago. With sellers more open to negotiation and rents rising rapidly, returns for equity rich landlords have been rising.
“While we’re unlikely to see landlords return to buying at pre-stamp duty surcharge numbers, it’s possible they may outnumber first-time buyers in some months next year, as was common before 2016.
“While house price growth is slowing, rental growth continues to strengthen, offsetting some, but not all of landlord’s increased costs. It’s these rising costs which are likely to mean rental growth will remain high for the next few years.”